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Rates in 2012 a One-Way Street

Rates on certificates of deposit vary from place to place, in shades of low, lower and lowest. In areas where CD rates are merely low, bustling economic activity and increasing loan demand push banks to boost CD and savings rates to attract more deposits.

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On a state-by-state basis, Louisiana boasted the highest deposit rates in 2012, according to a study out this week from Market Rates Insight, a pricing consultant to financial institutions. The average deposit rate in Louisiana was 0.51% last year. The national average according to Market Rates Insight was 0.35%.

It may go without saying, but no states experienced an increase in the average rate on deposits during 2012, according to Dan Geller, the executive vice president of Market Rates Insight.

Rates did fall in every state, though. The five states that saw the least decline in rates were Wyoming, with rates down 0.03%; South Carolina, down 0.03%, and Alabama, down 0.04%. Rates in the District of Columbia fell the least, though of course it is not a state. They were down 0.02% through the year.

Though loan demand lifts deposit rates, big drops in rates could be the result of two factors, Geller says.

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It could be that "price elasticity in the state is highly inelastic, meaning that people keep piling up money in bank accounts despite declining rates or the demand for loans being very weak, and banks want to slow down the flow of deposits by lowering rates," he says.